RCom net slides 21.4%, Revenue down 9%

Tough competition in the telecom sector has pulled down the profits of Reliance Communications (RCom), the third-largest telecommunications company in the country during the quarter ended December 2009. The Anil Ambani group firm has registered a drop of 21.4 per cent in net profit at Rs 1,108 crore during the quarter as against Rs 1,410.2 crore in the same period of the previous year. Revenue also declined by to Rs 5,310 crore compared to Rs 5,850.2 crore in the same quarter last year. However, on a sequential basis, the net profit is up from Rs 740 crore during the quarter ended September 2009.

Anil Dhirubhai Ambani, chairman, Reliance Communications Limited, said, “As an integrated and converged telecommunications service provider we are better placed to withstand the present highly competitive environment. Despite the sharp fall in tariffs, we have demonstrated stability in wireless revenues and margins and are confident to emerge even stronger in the future.”

RCom is not the only company that posted muted earnings in the quarter. The largest telecom player in the country, Bharti Airtel, posted a 2 per cent increase in profit after tax (PAT), while Idea Cellular’s net profit went down by 22.5 per cent year on year.

Telecom companies’ earnings had come under huge pressure in recent months due to a price war that had reduced revenues. Tata DOCOMO, which entered the market in August last year, introduced the 1-paise-per-second tariff plan that changed the rules of the game.

Many telecom companies had to follow suit by reducing their tariffs. Reliance Communications itself introduced two new plans during the quarter, called ‘Simply Reliance’, in three variants — 50 paise per minute, 1-paise-per-second and Re 1 per 3 minutes. They also came up with new SMS plans, which included 1-paisa per SMS and unlimited SMSes for Re 1 a day.

On a sequential basis, RCom’s PAT went up 49.7 per cent in the reporting quarter compared with the preceding one. Revenues, however, fell 7 per cent. The earnings before interest, depreciation, taxes and amortisation margin fell 1.3 per cent on a quarter-on-quarter basis.